8x8 2005 Annual Report Download - page 22

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March 31, 2004 and 2003, respectively. The decrease in VoIP semiconductor revenue was attributable to a decrease
in unit shipments combined with a decrease in average selling prices (ASPs). Revenues from system products
decreased approximately $264,000 in fiscal 2004 as compared to fiscal 2003 due to decreases in sales of media hubs
used with our hosted iPBX product and videophone sales offset by an increase in product revenues attributable to
the Packet8 service due to the growth in subscribers.
License and service revenues consist primarily of revenues attributable to our Packet8 service and technology
licenses and related maintenance revenues, as well as the royalties earned under such licenses. We expect that
Packet8 service revenues will continue to comprise substantially all of our license and service revenues on a going
forward basis. Prior to fiscal 2004, our license and service revenues were primarily generated by nonrecurring
transactions. License and services revenues were $9.1 million, $6.6 million and $5.3 million for fiscal 2005, 2004
and 2003, respectively. The $2.5 million increase in fiscal 2005 was primarily attributable to a $7.3 million increase
in Packet8 service revenues attributable to the growth in the subscriber base, which was partially offset by a
decrease of $4.8 million in license and maintenance revenues associated with our hosted iPBX product and IP
semiconductor telephony technology.
The increase in license and service revenues of approximately $1.3 million for fiscal 2004 as compared to fiscal
2003 was primarily due to the following:
• A $1.2 million increase in revenues in fiscal 2004 related to the license and sale of the technology related to our
next generation video semiconductor product to Leadtek as compared to revenues recognized related to the
development effort with Leadtek in fiscal 2003, which effort was terminated in fiscal 2004 in connection with
the license and sale transaction;
• A $1.7 million increase in revenues attributable to our IP semiconductor telephony technology, primarily
attributable to a July 2003 license of the Audacity T2 and T2U semiconductor products and Veracity software
to a single customer; and
• A $1.0 million increase in recurring service revenues attributable to our Packet8 service.
These increases in license and service revenues were offset by:
• A $1.4 million reduction in revenues from the June 2000 sale of our video monitoring business;
• A $750,000 decrease in royalties earned from a single customer under a license agreement for our MPEG video
compression technology; the final royalty revenues under this license agreement were received in the first
quarter of fiscal 2003; and
• A decrease of $386,000 in license and maintenance revenues associated with our hosted iPBX product.
Revenues from our ten largest customers in the fiscal years ended March 31, 2005, 2004 and 2003 accounted for
approximately 11%, 73% and 63%, respectively, of our total revenues. No single customer represented more than
10% of our total revenues during fiscal 2005. Two customers represented 26% and 16% of our total revenues in
fiscal 2004. We expect customer concentration to decrease in the future as revenues from our Packet8 service
increase as a percentage of overall revenues.
Sales to customers outside the United States represented 9%, 71% and 62% of total revenues in the fiscal years
ended March 31, 2005, 2004 and 2003, respectively. The following table illustrates our net revenues by geographic
area. Revenues are attributed to countries based on the destination of shipment (in thousands):
Year Ended Mar c h 3 1 ,
2005 2004 2003
United States..........................................................................
.
$ 10,472 $ 2,728 $ 4,218
Europe.....................................................................................
.
646 1,309 2,657
Taiwan.....................................................................................
.
157 4,163 1,569
Japan........................................................................................ -- 568 919
Other........................................................................................
.
200 540 1,640
$ 11,475 $ 9,308 $ 11,003